Deutsche Telekom snubs U.S. email servers after snooping scandal

BERLIN (Reuters) - Germany's leading telecoms operator will channel email traffic exclusively through its domestic servers in response to public outrage over U.S. spy programs accessing citizens' private messages, Deutsche Telekom said on Friday.

Deutsche Telekom launched the "E-mail made in Germany" initiative after a month of public indignation over reports on U.S. snooping based on documents leaked by fugitive former National Security Agency contractor Edward Snowden.

The spying scandal, which has filled German newspapers for weeks, has become a major headache for Chancellor Angela Merkel ahead of a September 22 election. Government snooping is a sensitive subject in Germany due to the heavy surveillance of citizens in the former communist East and under Hitler's Nazis.

"The spying campaign has deeply rattled Germans," Deutsche Telekom Chief Executive Rene Obermann said at a news conference in Berlin on Friday to launch the initiative aiming to make email communication in Germany "more secure".

Deutsche Telekom and its partner United Internet, which account for about two-thirds of all email users in Germany, said they would protect clients' emails via so-called SSL (Secure Sockets Layer) encryption. This is an option already offered by Google.

The former telecommunications monopoly, in which the German state remains the biggest investor with a 32 percent stake, said all data processing and storage would take place in Germany.

"This will make a big difference," said Sandro Gaycken, a professor of cyber security at Berlin's Free University.

"Of course the NSA could still break in if they wanted to, but the mass encryption of emails would make it harder and more expensive for them to do so," said Gaycken.

German news magazine Der Spiegel reported in June, citing an NSA document, that the United States taps half a billion phone calls, emails and text messages in Germany in a typical month.

Snooping fears will boost sales of IT security goods like virus scanners, firewalls and access administration tools, which had been expected to be worth 3.33 billion euros in Germany this year, up from 3.16 billion in 2012, according to the IT-market data provider International Data Corporation (IDC).

But Bitkom, which represents more than 2,000 German IT companies, expects even higher demand after news of wholesale electronic surveillance by American and British intelligence.

"The reports about PRISM and Tempora have considerably raised awareness for IT security," Bitkom President Dieter Kempf said in a statement, adding that the market should now outpace the 5 percent growth that had been expected this year.

Stefan Frei, a research director at information security company NSS Labs, said the Telekom response was a step in the right direction.

"This initiative helps to tackle the-day-to-day sniffing around on the communication lines but it still doesn't prevent governments from getting information," Frei said.